RETURN ON INVESTMENT, MARGIN, TURNOVER Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years; the company has been forced to lower prices so that it can maintain its market share. The operating results for the past three years are as follows: For the coming year, Ready’s president plans to install a JIT purchasing and manufacturing system. She estimates that inventories will be reduced by 70 percent during the first year of operations, producing a 20 percent reduction in the average operating assets of the company, which would remain unchanged without the JIT system. She also estimates that sales and operating income will be restored to year 1 levels because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share.
RETURN ON INVESTMENT, MARGIN, TURNOVER
Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years; the company has been forced to lower prices so that it can maintain its market share. The operating results for the past three years are as follows:
For the coming year, Ready’s president plans to install a JIT purchasing and manufacturing system. She estimates that inventories will be reduced by 70 percent during the first year of operations, producing a 20 percent reduction in the average operating assets of the company, which would remain unchanged without the JIT system. She also estimates that sales and operating income will be restored to year 1 levels because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share.
Step by step
Solved in 3 steps
